Yeah, anecdotally, I've found that if your company is doing things that the general public (or at least, the peers of your employees) considers vaguely sketchy, it's best to counter it by getting a reputation as a great place to work. Zynga is a decent example: there is plenty of negative press about it, but none of the negative press is about working there, since by all accounts they treat their employees very well.

I had a think about this on the train on the way home, and here's the formula that I've come up with.

Assuming that your employees aren't clueless (ie. know their market rate) and are free to leave (eg. not family members or H1-Bs), then you'll see significant employee churn if:

asshattery
$ < $market x -------------
cool factor

It seems to hold for most of the cases that I can think of.

Apple, for example, has a high asshattery factor (Steve Jobs) and market rate (they want awesome people) but also has a huge cool factor to balance it out somewhat (I heard they pay ~1.5x market).

Banks, Traders, Insurance companies, etc. have low cool factor, so they have to make it up with large salaries and perks and not be too toxic to work at.

In the case of Mahalo, it seems like they have a large asshattery factor (Calcanis is an overbearing idiot who will post nasty things about you on Twitter), and cool factor < 1 (spammers) and (it seems) they pay below market rates, so it's not suprising that they're seeing lots of "job hoppers".

A prior employer looked good on paper, and on Google; in fact, I went into the interviewing process very skeptical of their industry in general, and came away with a surprisingly positive vibe about the organization and what they were trying to do. The employees I spoke with were top-caliber folks; asked smart questions, and had good answers for me as well. The interview with the owners was fairly typical and high-level, nothing out of the ordinary.

So, I came aboard. The principals had just left for an extended sabbatical (they departed shortly after I interviewed with them). Morale seemed excellent when I started, and there was a great deal of interesting work to be done. When they returned, the mood changed very quickly, and it didn't take long to understand why.

I spent enough time there to do some interesting things, and help them over a knowledge slump during an infrastructure forklift, but it quickly became apparent that the owners and I had different ideas about how people should be treated, and how businesses should conduct themselves. My personal google-fu failed me on this one.

I showed myself the door to take a position that I would have never otherwise considered taking, knowing full well how that would look on a resume, but also knowing I didn't want to continue contributing to their bottom line.

(I have a few items on my resume I do not enjoy discussing in an interview, and I've had to add this one to the list: being vague or evasive suggests you're hiding something, but any real explanation just invites the idea that you're the kind of guy who doesn't work well with others. But, such is life.)